Plus, CNN's Dana Bash looks at the Grand Old Party and the new electorate with a foursome of Republicans: former presidential candidate Jon Huntsman, Congresswoman Cathy McMorris-Rodgers, former Commerce Secretary Carlos Gutierrez, and conservative activist Gary Bauer.

I'm Candy Crowley, and this is STATE OF THE UNION.

(END VIDEOTAPE)

CROWLEY: Good morning, from California, the state that led the tax cut revolution in the late '70s, but this past Tuesday voted to raise taxes. We'll talk to Governor Jerry Brown later in the show, but, first, that fiscal cliff, those tax hikes and spending cuts scheduled take place at the end of the year unless Congress acts.

President Obama and House Speaker John Boehner picked up where they left off in dueling public appearances where both sounded conciliatory, but didn't seem to budge much.

We must add to the president's to do list one more thing. He needs a CIA director after General David Petraeus resigned, admitting to an extramarital affair. Joining me now is New Jersey Democratic Senator Robert Menendez, and later, New York Republican Congressman Peter King, who is chairman of the House Homeland Security Committee.

Good morning, Senator. It's good to see you. Let me start out with the Petraeus matter. Do you believe that this is -- leaves a big hole in military or intelligence operations, or can they carry on smoothly?

MENENDEZ: Well, Mike Morrell, who is the second in charge, I think, is an excellent individual, has the president's confidence, and can carry on in the interim. Obviously General Petraeus was a tremendous asset at the CIA. It's unfortunate. I respect his decision under the circumstances. And I'm sure that the president will now seek out a new CIA director. But in the interim I believe the agency can continue to function under Mr. Morrell.

CROWLEY: Congressman King, do you have any concerns about either the way this was handled or about any holes that this might leave?

KING: First of all, Candy, I have questions about the whole matter. First of all, I'm wondering -- excuse me, how a -- something about emails went to the level of the FBI, how the FBI could have been investigating it this long, and yet, you know, General Petraeus was involved -- or Director Petraeus was involved.

To me, if it was the FBI director had the obligation to tell the president or the National Security Council at the earliest state. So it seems this has been going on for several months and, yet, now it appears that they're saying that the FBI didn't realize until Election Day that General Petraeus was involved.

It just doesn't add up, that you have this type of investigation. The FBI investigating emails, the emails leading to the CIA director, and it taking four months to find out that the CIA director was involved.

So I have real questions about this. I think a timeline has to be looked at and analyzed to see what happened. Now, as far as leaving the hole, General Petraeus was an outstanding general, outstanding, dedicated public official. He is going to be missed.

But, as I'm sure Senator Menendez would agree, no one is irreplaceable in government. But it is going to I think have at least a short-term impact any time you lose someone of General Petraeus's stature, especially under these circumstances, it does create -- again, at least a short-term gap. But, again, there are other people there who can and will definitely fill in.

But I go back to the point is, this just doesn't add up, the whole timeline here as to how this investigation is at the federal level.

CROWLEY: Well, can I ask you what you're suggesting?

KING: I'm suggesting there are a lot of unanswered questions.

CROWLEY: What are you -- I mean... KING: I'm suggesting -- I think the FBI has to come forward and tell exactly when they began the investigation, why it reached that level, when they first realized that General Petraeus might be involved, and at the time they did realize he was involved, did they go to the White House, did they go to the National Security Council? Because obviously this was a matter involving a potential compromise of security, and the president should have been told about it at the earliest state. That's really all I'm saying. How the FBI got involved? How long it was going on? Did they get a court order? Was it a federal court order for this email surveillance? You know, what was contained in that order? When did they realize that it possibly involved the CIA director?

CROWLEY: Senator Menendez, Congressman King, you know, has a lot of questions about how this whole thing came about, why the FBI was investigating the personal e-mail of the head of the CIA. He thinks things don't add up particularly in the timeline. Is there anything that seems fishy about this to you, about this story that we know thus far, which as far as certainly CNN reporting goes, was that the FBI was looking at this personal e-mail?

They thought perhaps there had been a breach. Turns out maybe there wasn't. Are you concerned about this? Are there questions that you don't have the answers to?

MENENDEZ: Well, Candy, I didn't quite hear what my colleague Peter King said, but let me just say that from all the published accounts so far, and we'll get to some hearings I believe this week, from all the published accounts it seems that the chain of events is pretty clear.

There was a threat by one individual against another. That individual went to the FBI in the pursuit of that review of that threat. They came upon access to emails of Mr. Petraeus and -- with this individual, and they are concerned that maybe that his personal emails had been hacked and, therefore, the possibility of a security threat.

And I think that if that is the sequence of events, that's perfectly understandable. Obviously, you know, there was a discussion between Jim Clapper and Petraeus. And there was a decision by General Petraeus that it was in his best interest of himself, the agency, and his family to resign.

So unless something else comes out, I think it's pretty clear I don't see a conspiracy behind every curtain, as some of my colleagues do.

CROWLEY: OK. Senator, let me turn to the so-called fiscal cliff which now we're looking at through the prism of what just happened in the elections. As far as you're concerned, is there a mandate that came out of this election that taxes should be raised on the wealthy? That seems to be what Democrats are arguing.

MENENDEZ: Well, I think there are two mandates. Number one is the electorate wants us to work together, Democrats and Republicans alike. But it's also very clear that the president made as a central theme of this campaign that he would not let the middle class and those struggling to get into the middle class, working families, to bear the brunt of all of the fiscal challenges moving forward. And to ask those who have wealth in our country to help their country at this time by foregoing the tax breaks they got, the lowest tax rates in 30 years. So I think that that's pretty clear.

And so notwithstanding that, I think if you heard both the president and the speaker, they talked about new revenues. And how you acquire new revenues can be determined by a variety of ways, by what baseline you use, by in fact closing tax loopholes and tax expenditures.

So there's definitely room here, but I think that the president has a very clear mandate. He made it a central tenet of his election. The people of this country clearly gave him a resounding victory on Election Day.

CROWLEY: Let me bring Congressman King in on this. Congressman, the senator says there was a mandate in this election that clearly said that the American people do want to raise taxes on the wealthy in the so-called ongoing fight over the fiscal cliff.

As far as the Republicans on the House side look at this, do you think that there is some room there that is necessitated by the fact that Republicans pretty much got clocked in the elections? Is there a message there for you all?

KING: First of all, Candy, I've not been able to hear anything that Senator Menendez is saying, so I'm relying on your interpretation of it.

As far as Congress -- Republicans feel strongly that tax rates should not be increased. Having said that, John Boehner, Speaker Boehner, has shown his willingness to work out an agreement here. That can be done by affecting deductions, loopholes, which would include those in the upper brackets so that the president could get the revenue that he says he is looking for, but it would be done in a way that tax rates are not increased.

So therefore, we believe that would not slow economic growth. So I think there's enough on the table if both sides want an agreement, I think John Boehner has put enough on the table that an agreement can be reached.

And as far as, you say, Republicans getting clocked in the last election, the fact is we still have a very large majority in the House of Representatives, so it could be said that while President Obama won, and he did win, the fact is in the Congress the American people have returned a Republican House of Representatives.

KING: So we also have, if you want to call it, a mandate.

I don't like to get into that terminology. But having said that, I think if there's any mandate it's to try to reach compromise, to try to reach common ground, and I think Speaker Boehner has put enough on the table that a real compromise can be reached.

CROWLEY: OK, gentlemen, I want to ask you both to stand by. When we come back, patience is thin and tempers are flaring on Long Island, New York.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: What do we want? We want power. When do we want it? We want it now. What do we want?

CROWD: Power!

UNIDENTIFIED MALE: When do we want it?

CROWD: Now!

(END VIDEO CLIP)

(COMMERCIAL BREAK)

CROWLEY: I am back with New Jersey Senator Bob Menendez and New York Congressman Peter King.

Gentlemen, in our last couple of minutes I wanted to ask you about the recovery efforts after Superstorm Sandy.

First to you, Senator Menendez. What is the situation now in New Jersey? I know you still have some folks out of power. What do you most need to do next?

MENENDEZ: Well, I think, Candy, that by tomorrow there will be a certain sense of normalcy again in the state in terms of all of these different elements. There might be some pockets. But what the biggest challenge is certainly down the shore area of New Jersey and central New Jersey, a tremendous challenge to families there.

A lot of people who don't have a home to go back to, a lot of property destroyed. So housing is a big issue as we move forward here, to have a place for people to call home for those who don't have other resources or family members to stay with in the interim. And then, you know, of course, FEMA has been on the ground, done a tremendous job. The next issue, in addition to housing, is getting the rest of the power on. I think most of that will be accomplished, hopefully by the end of today, early tomorrow.

And then the next thing is reconstruction, and that's a long-term proposition.

CROWLEY: It is, indeed. Just seeing that damage. You know this will be years before the Jersey Shore looks like the Jersey Shore that we all know.

Congressman King, to you. I know you have had some frustration, particularly with the power problems still ongoing in parts of New York. KING: Candy, Long Island, which is my district, has been devastated. We still have more than 100,000 customers that do not have power. And there's no timeline as to when they're going to get it. There are whole communities that have been wrecked like south Seaford, south Massapequa, Lindenhurst, Long Beach, thousands of people are going to be homeless, and the devastation is enormous.

I have asked the president if he could send in more members of the Army Corps of Engineers, also more FEMA workers and people from the Energy Department because LIPA, the Long Island Power Authority, has failed miserably. They are not doing the job. They are not communicating with the people.

And I'm hoping that if they can set up a federal infrastructure led by the Army Corps of Engineers, which would have a comprehensive plan which LIPA would be required to follow.

This is an absolute disgrace. We're now two weeks into the storm, and there's still over 100,000 people without power, and with no real estimate as to when they're going to get it back, getting misleading information, getting distorted information.

Just yesterday they changed signals in the middle of the game after telling people they needed electrical contractors' approval, they said that wasn't enough. It really has reached crisis proportions of a public health dimension in Nassau County, in Suffolk County, on the south shore in particular.

And LIPA has absolutely acted disgracefully, and that's why I'm asking -- sincerely asking the president whatever assistance he can give, not just as far as personnel, but as far as trying to come up with a comprehensive plan that will knock LIPA into shape.

CROWLEY: Thank you so much, Congressman Peter King, we wish you well. Certainly all the people of New York and New Jersey. Senator Menendez, thank you as well.

Next up, picking up the pieces after a disappointing election.

(BEGIN VIDEO CLIP) SEN. KAY BAILEY HUTCHISON (R), TEXAS: I think we had Republican candidates who got very high profile and said some very stupid things.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

CROWLEY: Former Congressman Tom Davis, a Republican, took a look at his party's failure to win the White House and noted, quote: "There are just not enough old white guys around." This is known as the demographics problem as observed more delicately by other Republican Party faithful.

(BEGIN VIDEO CLIP)

TIM PAWLENTY (R), FORMER PRESIDENTIAL CANDIDATE: You see a significant gap, of course, with Hispanic and Latino voters, with women voters, with blue collar voters.

(END VIDEO CLIP)

CROWLEY: Hispanics are a growing portion of the voting public, 10 percent this year. But they are a shrinking part of the Republican Party. In 2004 George W. Bush got 44 percent of the Latino vote. Four years later John McCain got 31 percent. Now 27 percent for Mitt Romney.

To be steadily losing votes in an expanding demographic is a recipe for failure. Florida Senator Marco Rubio, the son of Cuban immigrants and a Republican, suggests the problem is both tonal and substantive.

(BEGIN VIDEO CLIP)

SEN. MARCO RUBIO (R), FLORIDA: It's hard to make an economic argument to people who think you want to deport their grandmother.

(END VIDEO CLIP)

CROWLEY: And then there is the female vote, established in 1920, decisive in 2012. Fifty-three percent of the votes this year were cast by women who favored President Obama by 10 points.

(BEGIN VIDEO CLIP)

REP. STEVE LATOURETTE (R), OHIO: My wife is a Democrat, and she was so close to voting for Mitt Romney, but then, you know, Mourdock and Akin opened their mouths, and we sent them running back to the Democratic Party because they think we're nutty. (END VIDEO CLIP)

CROWLEY: Actually, married women tended favor Mitt Romney, but single women, a growing part of the population, went three to one for the president.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), FORMER PRESIDENTIAL CANDIDATE: I have just called President Obama to congratulate him on his victory.

(END VIDEO CLIP)

CROWLEY: Republicans have two years until the midterms to try to shed a little of the old off the Grand Old Party and reach out to a quickly changing American demographic. They do not lack for suggestions.

(BEGIN VIDEO CLIP)

RUDY GIULIANI (R), FORMER MAYOR OF NEW YORK CITY: My ideal Republican Party would be a Republican Party that was fiscally conservative, conservative on foreign policy and military policy, and on social issues we would be libertarian. I think that party could be a majority party. (END VIDEO CLIP)

CROWLEY: A party in search of voters. That's next.

(COMMERCIAL BREAK)

CROWLEY: We have a very distinguished group around the table today: former Commerce Secretary Carlos Gutierrez, who was also an adviser to presidential candidate Mitt Romney; former Republican presidential candidate and ambassador, Jon Huntsman; Gary Bauer, himself a former presidential candidate, now president of the conservative group American Values; Republican Congresswoman Cathy McMorris-Rodgers, the highest-ranking Republican woman in Congress; and our own CNN senior congressional correspondent Dana Bash.

Dana, I'm going to hand this to you. But I want to just ask your guests to give a one- or two-word answer to kind of kick this off, why did Republicans lose a couple of seats in the Senate, maybe a couple in the House, and, of course, the White House?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Thanks, Candy. Well, it's great to be here with all of you. Mr. Secretary?

GUTIERREZ: Thank you.

I would lay the blame squarely on the far right wing of the Republican Party.

BASH: Governor?

HUNTSMAN: No vision. Without a clear vision for the future, you're not going to be able to rally people of all backgrounds.

BASH: I think that was a shot at you. So I'll let you answer that one.

BAUER: I would just say, I think it's due at least in part to folks in our party that seem intent on attacking the fact that we're the conservative party in the United States. RODGERS: What I saw largely was a status quo election. The voters decided keep things basically the same with the Republicans in the majority in the House and the Democrats with the presidency and the Senate. But they also recognize both parties have something very important to offer.

BASH: Well, Mr. Secretary, since you said something very provocative as a Republican to go after the right wing, as you put it, of your party, I want to put up something that you, Mr. Bauer, said earlier this week. You said: "Romney was pro-life and pro-family, but I don't think we really engaged in the ad war on those issues, and I think if we would have engaged instead of being forced to be on the defensive, I still think we would have gotten many, many more of what used to be Reagan Democrats."

You argue that there wasn't enough discussion of social issues.

BAUER: Well, look, I think Ronald Reagan defined our party and the road to success for our party. On economics, smaller government, lower taxes, on foreign policy, a confident foreign policy that is on the side of freedom around the world.

But the other ingredient he brought were the values issues. And that's where we got millions of Midwestern and southern evangelicals, Catholics, et cetera, to leave the party of their birth, the party of their families and become Republicans. And I think if those issues had been engaged -- I'm not saying the campaign should have been run on them. The economy was obviously the major issue, but you can't take a crouching position if you're a member of a party that believes that all of our children should be welcomed into the world, for example, and protected by the law.

BASH: Governor, do you agree with that?

HUNTSMAN: Well, I'd have to say that the Republican Party needs to decide whether it wants to win or lose going forward.

BASH: And what do you think that that would allow you to do?

HUNTSMAN: Well, when we're talking about the party we're losing. When we're talking about America, we win.

So an embrace of all people and articulation of a vision -- people don't want to be moralized to, they don't want to be lectured to, they want to live their lives. They want an economy that works. They want jobs and opportunities, schools that educate the next generation, and then want to be left alone. And the sooner that we as a party can get around that and start preparing for the 21st Century, which is really the discussion that we need to have, how you prepare for the most competitive years ahead in a highly competitive world.

BASH: So be more libertarian on social issues, is that what you believe?

GUTIERREZ: Yes. I mean, I think the party is truly the party of growth and prosperity. And that's where you get into things like immigration. If we want to be the party of growth and prosperity, we have to be the party of immigration. So we should be leading comprehensive immigration reform. We should be leading the DREAM Act, not the military DREAM Act, students as well. We should be getting rid of things like English as the official language of government. We have to be welcoming immigrants

This is like we're competing for investment capital. We're also competing for human capital, and our party is scaring the heck out of them.

BAUER: 75 percent of the American people believe that English, sir, is the language of the United States. I don't understand why you would jettison a 75 percent -- any idea that somehow that's going to get you votes.

But second of all, there's no yearning by the American people for a second pro-abortion party. I mean, we've already got one of those. It's the most extremist party... BASH: Just one second, because I want to get the congresswoman in here. And before I do I want to show you all and our viewers some images of the Republican Party, particularly on Capitol Hill, where you are.

First of all, the image of the Senate Republican leadership. You see that? On the left white men, on the right all white men except you can see congresswoman you can see you in the back there. The only woman in Republican leadership. So that is the image right now with Mitt Romney not winning of the leadership of the Republican Party right now.

Is that appropriate?

RODGERS: Well, I don't think it's about the Republican Party needing to become more moderate. I really believe it's the Republican Party becoming more modern, and whether it's Hispanics, whether it's women, whether it's young people, the Republican Party has to make it a priority to take our values, take our vision to every corner of this country, to every demographic group, and I am confident that we can do it.

When you look at the exit polls, they were with us. For women, the top issues came back to the economy and jobs. And those are the issues that were on the voters' minds, and I think it's more about the messengers and who is communicating our values to every corner in this country.

GUTIERREZ: Can I just say I think that the idea of moderate and modern are -- is a difference without a distinction, because in order to be modern in 21st Century, we cannot be extreme right.

RODGERS: Well, it's not about changing our values and our principles, though. It is about bringing them so that people understand them in the 21st Century and how it makes us strong.

HUNTSMAN: It's not about how we talk about those values and principles. So, as a father of seven, married for 30 years, people can see the way I live my life. I don't need to sit there and rub it in people's faces, for heaven's sake.

What we need to do...

BAUER: Who rubs it in somebody's faces?

HUNTSMAN: Listen, the discussion that this nation wants to have is about solutions. It's not about right. It's not about left. It's not about moderates. It's about solutions to problems that are insolvable these days because we have a congress that can't seem to get their act together.

BAUER: Right, but if you're going to run for...

HUNTSMAN: And the sooner that we as a party get around to finding pragmatic solutions and moving us forward economically and from a foreign policy standpoint and recognizing the cultural and the demographic shifts that are profound in this country...

BASH: I'm glad you brought that up, because let's talk about the demographic shifts, and this is specifically something I know you want to address, Mr. Secretary. Let's look at just the overall Latino vote starting with George W. Bush, the man you work for. He got 44 percent of the Latino vote. John McCain in 2008 got 31 percent. Mitt Romney last Tuesday got 27 percent, a precipitous drop.

And I just want to continue on this just focusing in on a couple of the key battleground states. Florida, in 2008, 14 percent overall of the Latino vote. In 2012, 17 percent.

Colorado -- sorry, we have a different one up there. Let me actually go to this. Romney, this is very important, 39 percent. Obama 42 percent. This is the Latino vote in the state of Florida.

So Republicans are simply not doing well. And when I started to talk about before is that the percentage of the Latino vote is going up in those states.

GUTIERREZ: Right. As I talk to Latinos, the insight that I got was that Latinos were scared. You know, it wasn't the economy and -- they were scared of the Republican Party, and I think fear is what did us in. People were scared of people like Todd Akin. They were scared of Richard Mourdock. They were scared of the anti-immigration talk. They were scared of the xenophobes.

It's almost as if, though, we're living in the past.

BASH: Well, you mentioned xenophobes, I just want to -- just one thing and I want to let you guys speak. You mentioned xenophobes, I want you all to listen to Mitt Romney himself during the Republican primary. You were at this debate, I believe, governor, where he was talking about the Latinos and immigration. Watch this.

(BEGIN VIDEO CLIP)

MITT ROMNEY, (R) PRESIDENTIAL CANDIDATE: Then they're going to find they can't get work here. And if people don't get work here, they're going to self-deport to a place they can get work.

(END VIDEO CLIP)

BASH: Self-deport is not the kind of term that is -- when you talk about the tone that draws people in.

RODGERS: Yeah, they need to know we care. They need to know that we are pro-immigration. But again...

GUTIERREZ: But are we really?

RODGERS: Yes, I believe we are. I'm pro-immigration.

GUTIERREZ: Well, you are.

RODGERS: But the values -- we have the Republican share fundamental values that are in common with the Hispanics, and we have -- I believe part of it is putting forward some of the Hispanics that are in our party, the Marco Rubios and making sure that that face is there.

BAUER: Look, there's been research done among Hispanic voters about what motivates them on issues. And the fact of the matter is, only about 10 percent of Hispanics cite issues like amnesty and immigration issues and policies as what drives their vote. So I mean, first of all -- well, let me finish the thought. The research also shows that Hispanics are overwhelmingly pro-life and pro-family.

You are suggesting if we drop issues that we might have the best chance to appeal to those voters.

GUTIERREZ: I haven't talked about those issues. What I'm saying is that the Hispanics I know were scared of the Republican Party.

BAUER: Do you think that had anything to do with an ad campaign of a president that stoked fear in all kinds of voting blocs?

GUTIERREZ: I think it has to do with our incredibly ridiculous primary process where we force people to say outrageous things. They get nominated. And then they have to come back.

BASH: Mr. Secretary, you were the liaison for the Latino community for Mitt Romney. He was the one who used the term self- deportation. GUTIERREZ: I understand that.

BASH: Was that a mistake?

GUTIERREZ: Mitt Romney made some mistakes. I think he is an extraordinary man. And I think he would have made an extraordinary candidate. I think Mitt Romney's comments is a symptom. I think the disease is the fact that the far right of the party controls the primary process.

HUNTSMAN: Would you say that what would bring us all together and Gary and I worked for a great president, Ronald Reagan. He used language that people could connect with. Words matter. The way that you articulate the sometimes sensitive issues really does matter. There's a certain chemistry involved in a campaign, and we haven't been able to find the elements of that chemistry to get it right in recent elections.

The Republican Party I think owns the big issues of the day. We ought to be bold. We ought to be confident. If we spent as much time talking about solutions in the future as we did the president's birth certificate, for heaven sake, we probably would have won the darn election.

BASH: Now Candy started out with the problem. I just want to do a sort of lightning round. In a couple of words what you think is the solution. RODGERS: Well, I think we saw in the House the Republicans kept the majority. We had been bold. We have been putting forward our solutions, whether it was on the economy, the fiscal cliff, how to get Americans back to work. We have been putting that forward, and we got re-elected.

BAUER: America is not demanding a second liberal party. They've already got a liberal party, if that's what you believe. The Republican Party should be bold and confident in its conservative values from economics to foreign policy to values.

HUNTSMAN: Get our economic house in order and stay out of people's lives beyond.

GUTIERREZ: We need to stand for growth, for prosperity, for jobs, for entrepreneurship, for innovation, for dreaming for a better life, and, therefore, we need to lead to welcome immigrants.

Just one more thing, English is the national language of the United States, but the official language of government is a silly, ridiculous thing in the 21st Century.

BASH: OK, this is going to be a conversation for another time. This is fascinating, thank you.

BASH: And, Candy, certainly missed you here. That's for sure.

CROWLEY: You all make me sorry -- you make me sorry I'm not there. What a great conversation. Carlos Gutierrez, Jon Huntsman, Gary Bauer, Congresswoman McMorris-Rodgers, thank you so much. My thanks to my colleague Dana Bash.

California's governor, Jerry Brown, he knows a thing or two about political resurrection. We talked taxes, mandates, and marijuana, next.

(COMMERCIAL BREAK)

CROWLEY: California's Democratic voters mirror the coalition that powered President Obama to a second term last Tuesday. I spoke with Governor Jerry Brown about the election results, his push for tax hikes, and the Democratic Party's hold on state politics.

(BEGIN VIDEOTAPE)

CROWLEY: Governor, first, thank you so much for joining us this Sunday after Election Day. So let me start at the national level. Everybody has had their shot at interpreting what went on. What do you think the presidential election told us?

GOV. JERRY BROWN (D), CALIFORNIA: It told us that the majority of Americans identified with Barack Obama, because he was closer to their aspirations. For better or worse, Romney did symbolize the well-born, the privileged.

I could have sold him as a latter day Tom Dewey, who looked like he had a lot going for him, but at the end of the day Harry Truman had the common man, had the common touch, and I think Barack Obama was closer to the center of American political thinking than the Republicans.

CROWLEY: And that goes along with some of the polling that we've seen where Mitt Romney and President Obama were about even and sometimes Mitt Romney led when you asked who has got the best plan for the economy? But when you said, who best understands people like you? President Obama was always sort of -- you know, outran, outpaced Mitt Romney for that.

So the question is, when you look four years from now, when you don't have a President Obama on the ticket, is this a certain coalition for Democrats? BROWN: I think so. If you look at the majorities of Hispanic voters, African-American voters, Asian voters, younger voters, the future is with a politics that has government more responsive to the average person and not buying this doctrinaire politics of the market uber alles, the market over all.

It's a doctrinaire ideology that may play well in the pages of The Wall Street Journal or in boardrooms or in corporate retreats, but in mainstream America it's increasingly out of touch.

CROWLEY: So let me move you on to what happened here in California. You got voters to agree to tax hikes for the wealthy, temporary tax hikes for the wealthy. You've got them to agree to a quarter cent increase in sales taxes. California was the start of the tax cut sweep. Do you think California is the start of a tax increase sweep?

BROWN: Yes, I do. I was here in 1978 when Howard Jarvis beat the entire establishment, Republican and Democrat, because the property taxes had just gotten out of control. Now the cutting -- the cutting and the deficits are out of control. Our financial health, our credibility as a governing -- as a nation that can govern itself is on the chopping block.

And, yes, cuts going forward of certain commitments the country has made, that has to be embraced. But so also is revenue. And revenue means taxes. And certainly those who have been blessed the most, who have disproportionately extracted, by whatever skill, more and more from the national wealth, they're going to have to share more of that.

And everyone is going to have to realize that building roads is important. Investing in schools is important. Paying for the national defense is important. Biomedical research is important. The space program is an indicator of the world leader. All that takes money.

It's not all going to come out of Wall Street or out of your local department store. It requires the people, through their collective institution called government, to make a greater commitment, and I think they're ready to do it.

CROWLEY: And, yet, we do have states, as you know, with governors like Kasich and Walker, McDonnell, who have actually done sort of the opposite and have had fairly healthy economies.

BROWN: Well, first of all, taxes going up a little bit or taxes going down in the short-term doesn't affect the economy. California has almost a $2 trillion economy, so a tax increase of $6 billion or $7 billion is not even felt by the total economy.

Nevertheless, the growing gap, which is then resulting in more -- necessitating more and more borrowing can't be sustained. We have to either cut back more or create a balance of revenue and spending reductions. And I think -- I can tell you in California, you can only cut schools and university so much and then people say, enough already, and that's exactly what they said on election night Tuesday.

CROWLEY: And you see that having a national implication?

BROWN: Yes, because I think schools and universities are not partisan issues, what kind of a hospital situation you have in local cities and counties. Everything worked -- when government gets excessive, yes, people want to pull it back. That was the tax revolt.

But when the private sector begins to, you know, have more and more and the public sector is starved, people know that. It's common sense. You need a balance. So it's not, is the left right or is the right right? It's, to each according to its due. I mean, even if I can quote a biblical text, you know, render unto God what is God's, and what is Caesar is Caesar's.

Well, the state needs something, and the people need a great deal of their own money, too. But you've got to have the balance. And without a balance, you run the difficulties as the whole country breaks down for lack of common commitment. And after all, that's what our public institutions represent.

CROWLEY: And do you see yourself supporting any further tax increases? Business property tax increases has come up, because as you know -- because of previous initiatives on the ballot. They have not risen. Do you see the need for further tax increases?

BROWN: No, I don't see that need because I've looked at the budget gap, and this tax, which will be temporary over the next seven years, if we exercise restraint, we meaning the legislature and myself - we can - and we get a decent recovery - then we will not only have a balanced budget, we can make - meet our major responsibilities.

But - and the desires are endless, and legislative proposals know no limits. So this stack of possible spending bills is countless. And we'll have to just -- as the Buddhists say desires are endless, I vow to cut them down. Well, legislative ideas are endless and we'll have to cut at least some of them down.

CROWLEY: Let me ask you about a specific issue and that is the legalization of marijuana, which as you know was passed in Colorado as well as Washington State. Do you think it is time for the federal government, the Justice Department, to declassify marijuana as a category 1? BROWN: Well, I would say this, it's time for the Justice Department to recognize the sovereignty of the states. In California has a medicinal marijuana law, other states have passed some other measures.

CROWLEY: Well, recreational as in Colorado and in Washington State.

BROWN: We have a laboratory of democracy. We don't always agree with all states. Some states have capital punishment, some states don't. Some now have legalized marijuana, small amounts for recreational use, many states have legalized medicinal marijuana. I believe the president and the Department of Justice ought to respect the will of these separate states.

CROWLEY: In other words, no prosecution, no federal prosecution since it is a federal drug law of those who have legalized small amounts of marijuana.

BROWN: Yeah, I think the federal law can maintain, but it shouldn't try to nullify reasonable state measures. I'm not saying the state can do anything they want, but the measures that have been adopted so far have been after vigorous debate. In fact, there's been a marijuana legalization in California and it was rejected. It's been rejected in other states.

So we are capable of self-government. We don't need some federal gendarme to come in and tell us what to.

I believe comot (ph) toward the states, that's a decent respect, ought to govern the policy and that means change the policy now.

CROWLEY: Careful, because you might sound like a Republican here with the states rights thing.

BROWN: Well, there's a logic to states rights. And I know because of the whole manner of slavery and segregation, we moved toward a more centralized state but there's something called subsidiary. And that is move government responsibility to the institution closest to the people. And I think that's a very important principle, but consistent with fundamental human rights.

CROWLEY: And if you see feds back off on marijuana - on enforcement of laws as it apply to marijuana in Colorado and Washington State, is that something you'd bring up again in California? I mean, it's a great source of revenue if you could tax it and...

BROWN: I'm not prepared to bring that up. We already have a fair amount of marijuana use in the guise of medical marijuana and there's abuses in that field. And as governor, I review paroles for those sentenced for murder and I have to review the paroles and I review hundreds of them. And so many of them start with drugs, with marijuana, with alcohol, when they're 12, they're 15.

So it's dangerous. And people should not in any way take lightly the power of chemicals, whether it be cannabis or something stronger to affect the human mind in a way that really makes desperate people far more desperate.

(END VIDEOTAPE)

CROWLEY: The 2016 race already. That's next.

(COMMERCIAL BREAK) CROWLEY: And finally save for a few races still hanging in the balance, the 2012 election is over. It's time to sit back and ask ourselves who's going to run for president in 2016.

(BEGIN VIDEOTAPE) UNIDENTIFIED MALE: The award for the first possible 2016 contender to go to Iowa, that goes to Marco Rubio, the popular Republican senator from Florida. 11 days after this election, he'll be Iowa to headline an event for the state's Republican governor.

UNIDENTIFIED FEMALE: The big question is when is his mentor, the elder in Florida, Jeb Bush, going to make it there.

JEB BUSH, (R) FRM. GOVERNOR OF FLORIDA: This is the greatest country on the face of the earth.

UNIDENTIFIED MALE: Please, please. I haven't even had time to get drunk from 2012, much less have a hangover and get over it.

UNIDENTIFIED MALE: The first Republican candidate to go to Iowa to campaign for 2016 will be Sarah Palin. It gets awfully cold in the winters in Alaska. She'll be there soon.

SARAH PALIN, FRM. GOVERNOR OF ALASKA: Thank you so much Iowa.

UNIDENTIFIED MALE: If I lived in Iowa, I think I'd try to build a fence around the state and put up a big sign that says keep out until 2014. We've had enough.

UNIDENTIFIED MALE: The first Democratic candidate is going to be Joe Biden. He'll be there after he's sworn in late in January. And he'll also be the first candidate, of course, to make the first gaffe of the 2016 campaign.

JOE BIDEN, VICE PRESIDENT OF THE UNITED STATES: And you'll vote for me in 2016

WOLF BLITZER, CNN ANCHOR: I'll know the 2016 presidential campaign is started when Hillary Clinton goes to Iowa State University to deliver a major address.

UNIDENTIFIED MALE: Come on, you guys. We - let the -- dust hasn't settled. Can we just marinate these results and unpack what's about to happen or just happened? PAUL BEGALA, DEMOCRATIC STRATEGIST: Let's all have a blanket pledge to oppose anybody who shows up in Iowa for, I don't know, the next three years?

(END VIDEOTAPE)

CROWLEY: Four year scheduling purposes, there are 1,150 days until the Iowa caucuses in 2016.